According to a Wall Street Journalreport tonight, "[t]he online-video service has been at odds with Verizon Communications Inc. and other broadband providers for months over how much Netflix streaming content they will carry without being paid additional fees. Now the long simmering conflict has heated up and is slowing Netflix, in particular, on Verizon's fiber-optic FiOS service, where Netflix says its average prime-time speeds dropped by 14 percent last month."

Further Reading

One possible interpretation of the above statement is that Verizon has been demanding direct payments from Netflix in exchange for carrying any video traffic beyond some numerical limit. That's probably not precisely what's happening, however, because the report says this particular dispute has been simmering for months—meaning it started before the court decision last month that overturned the Federal Communications Commission's net neutrality rules. Prior to that court decision, it would not have been legal for Verizon to refuse to carry Netflix traffic when its payment demands weren't met.

However, there are other ways Verizon can play hardball and affect Netflix performance. Netflix has been pushing ISPs to host its caching equipment within their data centers and to peer directly with the video provider—that is, exchange traffic without a third-party intermediary.

"Netflix wants broadband companies to hook up to its new video-distribution network without paying them fees for carrying its traffic," the Journal noted. "But the biggest US providers—Verizon, Comcast, Time Warner Cable, and AT&T Inc.—have resisted, insisting on compensation."

ISPs are under no obligation to accept Netflix's peering and caching offers. Teaming up with Netflix might improve performance for consumers, but not doing so isn't the same as refusing to carry traffic. If Verizon's network and its interconnections with third-party networks are strong, Netflix quality should be reasonably good.

The biggest problem is probably the same one we've seen in previous disputes: the connections between ISPs and the Internet bandwidth providers that Netflix pays to distribute its traffic to the rest of the Internet.

As we've reported before, those bandwidth providers, such as Cogent Communications, have traditionally exchanged traffic with consumer ISPs without money changing hands. But ISPs are using increases in Netflix traffic as justification to demand payment.

When negotiations stall, Verizon could put pressure on Cogent by delaying equipment upgrades needed to add capacity to links that have become congested. Cogent accused Verizon of doing just that last June, and it seems it may be happening again.

"People familiar with Cogent's and Netflix's thinking say the cable and telephone companies are delaying upgrading existing connections," the Journal reported. "Executives at major broadband providers, meanwhile, privately blame the traffic jam on Netflix's refusal to distribute its traffic more efficiently. ... Neither side is budging, people familiar with the matter said, leading to growing congestion."

The report noted that "Verizon has a policy of requiring payments from networks that dump more data into its pipes than they carry in return. 'When one party's getting all the benefit and the other's carrying all the cost, issues will arise,' said Craig Silliman, Verizon's head of public policy and government affairs."

Netflix traffic being sent from Cogent to consumer ISPs has reportedly increased in the months since Netflix started offering its so-called "Super HD" streams to all customers, rather than just customers of ISPs who have partnered with Netflix.

"Within the past four to six months, Netflix traffic through Cogent's connections to one major broadband provider has at least quadrupled, one person familiar with the matter said," the Journal reported.

Netflix declined to comment on financial disputes with Verizon.

Cogent told Ars that "this is a continuation of the same dispute" that we wrote about last June. A Verizon spokesperson called this latest news a "replay of the longstanding issue you guys covered a while back."

I can see both sides of this argument. The whole reason they're called "peering agreements" is because both sides are supposed to be peers, as in roughly equal. That means they're sending and receiving a roughly equal amount of traffic. That's obviously not the case here. On the flip side, ISPs need to make sure their customers are getting what they're paying for.

It's going to be tough for a while, and the only way I can see this getting resolved is Netflix paying up and passing the costs on to their subscribers. Net Neutrality doesn't enter the equation here.

No, no, no, no, no!

That argument had meaning only when the internet was young and business/academic based, not in the internet of the past ten years.

There _is_ balance. Verizon has ZERO content to offer to the rest of the internet, and the rest of the internet has everything that is desired by the Verizon customers. The balance is not one of byte-per-byte but one of supply-and-demand.

If I subscribe to 50Mb/s download service, then I should get that rate, modulo whatever slowdowns are present on the Internet at large. But if Verizon intentionally limits my download rate below 50Mb/s, then they are at best falsely advertising their service, and at worst, in breach of my service contract.

Guess what Verizon? It's Netflix that gives me any reason to continue paying for an ISP. I'm currently on a 50down Verizon connection and because of my inability to use Netflix at just about any time of day (oh, it's fine, great even, from 2AM-5AM) when I move I'm going to be looking to see if there are any small time ISPs. Or at least anything other than you available. I know FIOS is available where I'm looking to move to and I don't want it.

Pull your head out and realize that it's these high bandwidth services that make us, your paying customers, want high-speed internet in our home. If it wasn't for these services most of us would probably make do fairly well with mobile connection (and the occasional tether) only.

I can see both sides of this argument. The whole reason they're called "peering agreements" is because both sides are supposed to be peers, as in roughly equal. That means they're sending and receiving a roughly equal amount of traffic. That's obviously not the case here. On the flip side, ISPs need to make sure their customers are getting what they're paying for.

It's going to be tough for a while, and the only way I can see this getting resolved is Netflix paying up and passing the costs on to their subscribers. Net Neutrality doesn't enter the equation here.

No, no, no, no, no!

That argument had meaning only when the internet was young and business/academic based, not in the internet of the past ten years.

There _is_ balance. Verizon has ZERO content to offer to the rest of the internet, and the rest of the internet has everything that is desired by the Verizon customers. The balance is not one of byte-per-byte but one of supply-and-demand.

I can only imagine how postal services would be like if they worked on Verizon's logic. FedEx and UPS arguing that anyone receiving goods should have to pay a subscription fee from them, and the senders should also pay them to deliver it.

Verizon wants to controls it like it does with Data with their mobile device. How come google Fios is so much faster then their quantum piece of shit Fios. Their Fios is just as fast as my Cable company provides me. 50/25. If you want to go any higher than that, remove a testicle and donate it.

A) The government has no active role here; this should be treated as a property rights issue guided only by contract and tort law, provided Verizon acquired "property rights-like" powers over the pipe they are using. No, it doesn't matter if the public or the government is involved. B) "Net neutrality" has nothing to do with neutrality, it is basically a government takeover of private enterprise. It is categorically unjust. Only property rights and contract law should apply here. C) The real issue is what are the terms by which Netflix uses the pipe. If they negotiated for a speed (like any customer does) then they can sue if they don't get it. End of story.

Aren't libertarians cute? Government regulation is the price Verizon pays for operating in the US, with all the benefits that come with that. If they don't like it, they should sell internet in Somalia.

A) The government has no active role here; this should be treated as a property rights issue guided only by contract and tort law, provided Verizon acquired "property rights-like" powers over the pipe they are using. No, it doesn't matter if the public or the government is involved. B) "Net neutrality" has nothing to do with neutrality, it is basically a government takeover of private enterprise. It is categorically unjust. Only property rights and contract law should apply here. C) The real issue is what are the terms by which Netflix uses the pipe. If they negotiated for a speed (like any customer does) then they can sue if they don't get it. End of story.

Netflix isn't "using Verizon's pipe" The Verizon CUSTOMERS are using Verizon's pipes to get the internet content for which they pay a monthly subscription. Netflix IS paying THEIR ISP for the bandwidth THEY use at their end.

BTW, I suspect Verizon is paying Cogent to receive that Netflix traffic (see diagram from above link), yet if they peered with Netflix directly they wouldn't have to pay anything. Yet they resist what appears to be a cheaper solution...

You do realize that Verizon made $69,570,0000,000 in profit before interest/taxes last year. This is just an unjustified revenue grab. Verizon is already been paid for this delivery by all of the consumers paying for 50Mb/s download (me included).

They also have enough cash in their checking account to buy Netflix and still have $30B left over.

'When one party's getting all the benefit and the other's carrying all the cost, issues will arise,' said Craig Silliman, Verizon's head of public policy and government affairs."

Funny how he leaves the consumer out of the equation. You know, the other side of the connection requesting all that data? All data has been bought and paid for by sender AND receiver.

yep. this all started when att wanted to charge google for "using their tubes" (after google bought up all the dark fiber att wanted to pick up for a song, but waited too long)... which made as much sense then as it does now. i pay my isp for access and to upgrade and increase my access over time, not for them to charge the services i want to access more, which will end up costing me more when the services pass the buck along to me. it's such a bullshit new way to ream the consumer... i can barely think about it without getting incensed and wanting to punch granite.

some jackass saw that cellular carriers could charge 10,000% upmarked fees for SMS, and then decided there just had to be a way to screw their customers just as badly.

Peer arrangements are made so that each side carries equal traffic between the two sides. If the side carrying down link traffic from Netflix is completely unbalanced, its not fair for the other side. As a non Netflix user, I don't see any reason why my Verizon subscription fees should subsidize Netflix users.

Netflix does not want to pair for hosting servers, they don't want to pay for equal peering arrangements. Its time for people to wake up and realize that $7.99 is absurdly cheap, especially when the person has dropped cable and only uses Netflix. Netflix having to raise their prices a dollar or two per subscriber to pay for network upgrades is not going to kill Netflix or their customers.

If it bothers people, they can either drop their service or watch video from another provider. Obviously, people should contact both parties to put pressure on them to work out some sort of agreement.

People can't switch to another provider. Verizon generally has a monopoly in the areas they service.

Neither Netflix nor the users are to blame if data transmission happens to blow a hole in Verizon's little trick of overselling bandwidth, just like most other ISP do. This practice needs to dissapear.

As a customer, I expect to be delivered as much data I paid for. If my link is 50 MB then ISP should comply with keeping enough resources to actually deliver what was agreed upon the contract we have.

ps: Don't forget this may also affect entire countries as well where the main link to USA happens to be on a throttled network effectively hurting thousands of users with no relation to USA ISPs.

It's more likely that users would switch from Verizon to another ISP than they would drop Netflix if they have a choice of ISPs. Since I don't subscribe to Netflix, I'm primarily using mobile data. At work I can use Wi-Fi.

Perhaps Netflix should charge Verizon for the privilege of delivery of Netflix's content, otherwise Verizon's ISP service may go the way of their land line (phone) service.

BTW, I suspect Verizon is paying Cogent to receive that Netflix traffic (see diagram from above link), yet if they peered with Netflix directly they wouldn't have to pay anything. Yet they resist what appears to be a cheaper solution...

3 options1. Pay Cogent to connect them to NetFlixNon NetFlix users subsidize the NetFlix traffic2. Peer with NetFlix ... neither side paysVerizon leaves money on the table that they think they can grab3. NetFlix pays Verizon and connects directlyNetFlix customers subsidize Verizon's userbase

There is no mistake on Verizon's part. They are seeing $$$ and they are not going to settle for simple neutrality and no cost connections to a supplier they use to attract paying customers, when they honestly believe they can get both ends to pay for the connection.

Perhaps if Verizon chooses to charge Netflix, Netflix should instead choose to not be available to Verizon subscribers. See how great that works out for Verizon.

That would be suicide for Netflix. Verizon subscribers don't have the option to switch to another subscriber, so they'd basically just throw away a bunch of money. Meanwhile, Verizon subscribers would still want access to the parts of the internet Verizon isn't censoring, so they'll end up paying them anyway.

Neither Netflix nor the users are to blame if data transmission happens to blow a hole in Verizon's little trick of overselling bandwidth, just like most other ISP do. This practice needs to dissapear.

You can't afford an Internet connection that isn't oversold in your home, and neither can 99.99% of consumers. Overselling isn't bad in and of itself, and this issue is actually unrelated.

Nobody ever discusses the fact that Netflix can choose to use a multitude of different CDNs to balance their load. They could even just pay for transit service. Instead they just choose the cheapest CDN and tell ISPs to deal with it, and in the process are delivering a shitty product to their customers.

Both sides are being stubborn.

Netflix wants to offload their ISP costs to the user's ISP. But that's not a automatically winning argument. Arstechnica has to pay to deliver their content to me, despite the fact that I request it.

As someone who pays for 50Mbps of down bandwidth, I expect to get 50Mbps of bandwidth from wherever the fuck I feel like it. It could be some place in Indonesia, I don't care. If they're feeding into the ISP's network--at any point the ISP has a connection--the ISP should forward it to me as fast as they can. If they can't do 50Mbps, then why the fuck are they charging me for 50Mbps?

Additionally, NetFlix's CDNs (they have several, not "the cheapest CDN") are actually pretty decent. This is purely Verizon saying, "We have customers, you want them. We are their sole landline provider, if we drop you, you lose them. Pay us."

Also remember Verizon's lines, the core of its network, were heavily subsidized by the US government. So don't pretend that being entirely hands off would be the appropriate thing to do, to let the market be as it should be. The government already helped (necessarily) set up the natural monopoly. Now it needs to recognize the monopoly and the absolute utility it provides and make internet connectivity a utility. One that isn't allowed to throttle, block, or HTML inject ads as it sees fit.

I really hope this tactic backfires on Verizon. ISP's generally overcharge for their services and have little to no competition in most markets they operate in. It's not like Joe User can dump Verizon and call Comcast for interwebs, and even if they could Comcast is doing the same thing and still charging too much.

Verizon. You should stop and think for a minute. Your customers pay you to provide the necessary bandwidth to use services like Netflix, Hulu, etc, over the internet.

Right on the FiOS website it says:"With FiOS, typical customers enjoy download speeds of 50 Mbps, awesome for streaming movies, playing games and in home with 2-3 devices running at the same time."

From what I read there Verizon says their internet is awesome for streaming movies, playings and having 2-3 devices running at the same time.

Does it need to be amended to say "With FiOS, typical customers enjoy download speeds of (up to) 50 Mbps, awesome for streaming movies (not from Netflix. From Verizon.), playing games and in home with 2-3 devices running at the same time."?